Non-Compete Agreements 8 Things to Know
Non-Compete Agreements in Massachusetts are subject to strict new guidelines as of October 1, 2018.
On August 10, 2018, Governor Baker signed into law the ‘Act relative to the judicial enforcement of non-competition agreements’ . This law became effective on October 1, 2018 and it limits the ability of private Massachusetts employers to enter into and enforce non-competition agreements with employees, inclusive of independent contractors.
Non-compete Agreements have traditionally been used by employers to stop an employee from taking the knowledge and skills gained during their time working for the employer and leaving to work for a competitor or to start their own business in competition with the former employer. These types of agreements have long been a cause of contention and lawsuits. The new legislation and requirements will result in these agreements being used less frequently.
This legislation effects only non-compete agreements entered into on or after October 1, 2018. The legislation does not affect agreements made before that time; they remain in effect. The legislation does not affect non-solicitation and confidentiality agreements. These agreements typically contain written promises from the employee to not: solicit or hire employees of the employer; solicit or transact business with customers, clients, or vendors of the employer; share or use client lists, trade secrets, price lists, or other proprietary information of the employer.
Massachusetts business owners who are considering entering into non-compete agreements with employees or contractors in the future need to be aware of the following provisions of the new law:
Non-Compete agreements entered into on or after October 1, 2018…
May only be used with salaried “exempt” employees or contractors, and not with hourly employees.
Are not valid if employee is laid-off or terminated without cause.
May only be for a period of 12 months or less after leaving employer.
Need to be limited in the type of work prohibited, and in geographical scope.
Need to offer acceptable consideration to the employee. There is a recommendation of payment equal to 50% of the previous salary for the duration of the prohibition on performing the same tasks for another employer or for self-employment.
If an agreement is entered into after hiring, and not in conjunction with leaving employment, consideration other than continued employment needs to be offered.
Agreements entered into at time of termination as part of a separation agreement are not restricted but they need to give an employee 7 days to consider and consult with council.
Agreements used at time of hire need to be given to the employee with 10 days to consider and consult with legal counsel before beginning work.
The full text of the new law can be found here:
For assistance with Non-Compete, Confidentiality, and Non-Solicitation agreements, or any other HR issues, please reach out to us. We are always eager to be of assistance to you!
Denise Noble & HR Team
The HR Engineers